In Pennsylvania, injured workers are entitled to settle claims filed under the Workers' Compensation Act. Historically, workers were unable to do so and, instead, through what was called a “commutation,” they effectively resolved their cases, but left open a bunch of loose ends. The Pennsylvania legislature amended the Workers' Compensation Act to allow injured workers and their employers and insurance companies to settle claims. As a result, injured workers can resolve all or any portion of a claim through a lump sum settlement – called a “Compromise and Release.”

Under a “Compromise and Release,” which is also referred to as a “C&R,” injured workers, insurance companies and employers are able to settle an entire claim, only the wage loss portion of a claim, only the medical expense portion of a claim, or any other aspect of a claim the about which the parties agree. Basically, as long as the settlement is approved by the judge, the terms are up to the parties.

Once the parties have agreed to the terms of the settlement, they will enter into a Compromise and Release Agreement, which is a settlement agreement that specifically states the terms of the settlement, that is, it specifies what is being settled and what is not being settled. Unlike with most personal injury settlements, Pennsylvania law requires the parties to present Compromise and Release Agreements to a Workers' Compensation Judge, who must hold a hearing and decide whether the claimant (the injured worker) understands the legal significance of the settlement, is entering into the agreement voluntarily, and has not been promised anything other than what is contained in the agreement.

Importantly, the Workers' Compensation Judge does not determine whether the settlement is fair and does not determine whether the settlement is in the best interests of the injured worker. Rather, the Judge is required and can only decide whether the injured worker understands the legal significance of the agreement and its effect upon future benefits, if any.

A court stenographer is present at the C&R hearing, at which the claimant must attend, as will the claimant's attorney and an attorney for the employer/insurance company. In some cases, the Workers' Compensation Judge will allow the claimant to testify by phone, but only if there is a compelling reason to do so.

The Judge will first review the Compromise and Release, which must be signed by the claimant and witnessed by two people. Alternatively, the claimant's signature may be notarized before the hearing takes place and must be notarized if the claimant will be testifying by phone. The Judge will then listen to the testimony and decide if the claimant understands the term of the C&R Agreement and is entering into the agreement voluntarily. After the hearing is over, the Judge issues an Order and a written decision approving the Compromise & Release.

There are a few things to know about C&Rs. First, they are not always in a worker's best interest. That is why it may be helpful to have a lawyer. Second, once a C&R is approved, it is final, the worker cannot go back and reopen the settled portion of the case except in very unusual and very rare circumstances. Third, there are other relevant issues that should be considered, including the impact on Social Security and pension benefits, the impact on Medicare benefits, child support orders, and numerous other areas.

Insurance companies like to settle workers' compensation cases when a claimant does not have a lawyer. They can often settle for “cheap” and can hope that they can avoid dealing with some of the issues mentioned above.

In sum, C&Rs can be very helpful, but there are pitfalls that must be avoided.